Can I deduct employee business expenses on my tax return?
Generally, you must use Form 2106,
Employee Business Expense, or Form 2106-EZ,
Unreimbursed Employee
Business Expenses, to figure your tax deduction on your tax return for employee business expenses, and attach if to
your Form 1040. Your tax deductible expense is then taken to Schedule A of Form 1040, as a miscellaneous itemized
tax deduction subject to the 2% of adjusted gross income limit. Special tax rules may apply, depending on your
employer's reimbursement arrangement.
Generally, subject to qualifications, the following expenses are tax deductible on your tax return:
Agency fees for a job;
Airfares;
Auto club membership;
Auto expenses;
Books used on the job;
Bond costs;
Car insurance premiums;
Cleaning costs;
Commerce association dues;
Commuting costs;
Computers;
Convention trips;
Correspondence courses;
Depreciation for tax purposes;
Dues;
Educational expenses;
Employment agency fees;
Entertainment expenses;
Equipment;
Foreign travel costs;
Furniture;
Garage rent;
Gasoline;
Gasoline tax;
Gifts;
Home office expenses;
Hotel costs;
House hunting costs;
Instruments;
Labor union dues;
Laundry;
Legal expenses;
Local transportation;
Lodging;
Magazines;
Malpractice liability premiums;
Meals;
Medical examinations;
Membership dues and fees;
Motel charges;
Moving expenses;
Parking fees;
Passport fees for business travel;
Pay turned over to your employer;
Periodicals;
Protective clothing;
Rail fares;
Reimbursed expenses;
Safety helmets;
Safety shoes;
Secretarial conventions;
Subscriptions;
Taxi fares;
Telegrams;
Telephone calls;
Toll charges;
Tools;
Trade association dues;
Transportation and travel expenses;
Tuition;
Typewriters;
Uniforms;
Union dues; and
Work cloths.
Tips for Deducting Work-Related Expenses
by John Rossheim
Monster Senior Contributing Writer
Commitment to your job sometimes requires digging into your own pocket to purchase a uniform or treat a client to
18 holes of golf. But such unreimbursed expenses can pinch financially, unless you learn IRS rules for deducting workrelated costs from your taxable income. Fastidious record keeping and advice from a tax professional can also help
mitigate the suffering.
"Many of my clients with unreimbursed expenses hold sales-related positions," says tax preparer Jennifer MacMillan, a
member of the California Society of Enrolled Agents. Still, MacMillan's clients who take these deductions include real
estate agents, customer service representatives, carpenters, teachers and computer technicians.
Here's a guide to getting the write-offs you deserve.
Three Hurdles to Deduction
The good news: Many unreimbursed employee expenses can be deducted. The bad news: You'll have to clear three
hurdles before you can claim them on form 2106 or 2016-EZ:

To claim most work-related expenses, you must itemize deductions.

You can only deduct the portion of your work-related expenses that exceeds the IRS floor: 2 percent of
adjusted gross income.

If your 1040 says you must pay the alternative minimum tax (AMT), you cannot take work-related deductions.
Created in the '60s to ensure the wealthy pay their fair share, the AMT is increasingly hitting middle-class
earners.
If you've tripped on one of these hurdles, there may be a workaround. "A salesperson could speak to his employer
and say, ‘Look, I'm laying out these expenses and not even getting a tax deduction,' " says Michael Mongelli, a CPA
and tax principal with accounting firm Sax Macy Fromm. "The employee could ask the employer to make the expense
reimbursable and adjust the sales commission if necessary." The business could then take the tax deduction and
share the savings with the employee.
Costs You May Be Able to Deduct
Once past these hurdles, you can deduct a wide variety of employment-related expenses, including:

Transportation and Travel: Sometimes considered unreimbursed costs and therefore deductible. For example,
commuting costs cannot be claimed, but the expense of getting from a job with one employer to a second job
with another is deductible. The per-mile reimbursement rate varies according to activity.

Meals and Entertainment: They may be deductible but only at half the actual cost. As with many deductions,
scrupulous records are required. Work-related doesn't mean the pizza you ordered at your desk. It implies you
were with colleagues or clients and discussing business matters.

A Computer or Home Office: If used exclusively for work, they may be deductible.

Union and Professional Dues, and Work-Related Licenses, Legal Fees and Medical Examinations
• Uniforms, Tools, Supplies and Magazine Subscriptions: They may be deducted if not reimbursed by the
employer.

Work-Related Educational Expenses: Deductible if the coursework is required by your employer or helps you
maintain or improve your qualifications in your current line of work.

Job Search Expenses: Generally are deductible, but only to change jobs within your current field.
Of special interest to workers in hazardous environments: "Safety gear is deductible even if it's not required," says
Donna Le Valley, a contributing editor for J.K. Lasser's Your Income Tax 2006.
Caution: Deductions Increase Your Audit Risk
Work-related deductions may draw an IRS audit, especially if expenses are large in relation to income. Some of
MacMillan's clients in sales take more than $20,000 in mileage deductions. "Although the IRS doesn't disclose how
they score returns for audit, that's got to score high."
According to Le Valley, "The biggest audit trigger is going to be the difference between last year's return and this
year's."
The key is to keep complete records, following IRS rules. "It's better to be Felix Unger than Oscar Madison," says
William Abrams, a CPA and tax lawyer with Abrams Garfinkel Margolis Bergson LLP. "It's quite a thing to prove
yourself right without the contemporaneous records."
Still, you should deduct what you're entitled to. Even when an expense seems unusual, if it's legitimate and welldocumented, taxpayers shouldn't fear claiming the deduction, Le Valley says.
You might be able to deduct travel expenses if you are an employee who temporarily travels away from your tax home for
business purposes. The information in this document will help you determine what job-related expenses you may deduct on
Form 2106, Employee Business Expenses, if any.
You are traveling away from home if both of the following apply:

Your duties require you to be away from the general area of your tax home substantially longer than an ordinary day's
work.

You need to sleep or rest to meet the demands of your work while away from home.
Travel Expenses
For tax purposes, travel expenses are the ordinary and necessary expenses of traveling away from home for a business, a
profession, or a job. The following chart lists common deductible expenses you might have when traveling away from home for
business purposes.
If you have
expenses for:
Then, you can deduct the cost of:
Transportation
Travel by airplane, train, bus, or car between your home and your business destination. If you are given a
free ticket or are riding free as a result of a frequent traveler or similar program, your cost is zero. If you
travel by ship, refer to the IRS Publication 463, "Luxury Water Travel" section for additional rules and
limits.
Taxi, commuter
bus, and airport

limousine
Fares for these and other types of transportation that take you between one of the following:
The airport or station and your hotel

The hotel and the work location of your customers or clients, your business meeting place, or
your temporary work location
Baggage and
shipping
Sending baggage and sample or display material between your regular and temporary work locations.
Car
Operating and maintaining your car when traveling away from home on business. You can deduct actual
expenses or the standard mileage rate, as well as business-related tolls and parking. If you rent a car
while away from home on business, you can deduct only the business-use portion of the expenses.Read
more on Job-Related Vehicle Expenses.
Lodging and
meals
Your lodging and meals if your business trip is overnight or long enough that you need to stop for sleep or
rest to properly perform your duties. Meals include amounts spent for food, beverages, taxes, and related
tips. Refer to the IRS Publication 463, "Meals" section for additional rules and limits.
Cleaning
Dry cleaning and laundry.
Telephone
Business calls while on your business trip. This includes business communication by fax machine or other
communication devices.
Tips
Tips you pay for any expenses in this chart.
Other
Other similar ordinary and necessary expenses related to your business travel. These expenses might
include the cost of transportation to or from a business meal, public stenographer's fees, computer rental
fees, and the cost of operating and maintaining a house trailer.
Tax Home
For job-related travel expenses, you must be traveling away from your tax home. The following guidelines clarify where your tax
home is considered to be:

Generally, your tax home is the regular place of business or post of duty, regardless of where you maintain your family
home. The tax home includes the entire city or general area of your place of business.


If you have more than one regular place of business, your tax home refers to your main place of business.
If you have no main place of business because of the nature of your work or the circumstances, your tax home may be
the place where you regularly live or where your main home is located. Use the following to determine whether your main home
can be considered your tax home:
o
You perform part of your business in the area of your main home and use that home for lodging while doing
business in the area.
o
You have living expenses at your main home that you duplicate because your business requires you to be
away from that home.
o
You have not abandoned the area in which both your historical place of lodging and your claimed main home
are located, you have a member or members of your family living at your main home, or you often use your main home for lodging.

If there is no place where you regularly live, your tax home is wherever you work. In this case, you cannot claim a travel
expense deduction because you are never considered to be traveling away from home.
Review the following examples of whether job-related travel expenses can be deducted for travel away from a tax home:

Sara is single and lives in Boston, Massachusetts in an apartment she rents. For a number of years, she has worked for
her employer, who has enrolled her in a 12-month executive training program. She does not expect to return to work in Boston
after she completes her training. During her training, Sara does not do any work in Boston. Instead, she receives classroom and
on-the-job training throughout the United States. She keeps her apartment in Boston and returns to it frequently. She uses her
apartment to conduct personal business and keep up her community contacts in Boston. When Sara completes her training, she
is transferred to Los Angeles, California. Sara's tax home is Boston because she had duplicate living expenses and she
maintained community contacts there.

Maria Pia is an outside salesperson with a sales territory covering several states. Her employer's main office is in
Newark, New Jersey but she does not conduct any business there. Her work assignments are temporary and she has no way of
knowing where her future assignments will be located. She has a room she does not pay for in her married sister's house in
Dayton, Ohio where she stays for one or two weekends a year, but she does no work in that area. Maria Pia does not have a tax
home because she does not meet any of the guidelines listed above. She cannot deduct her travel expenses.

Jared, the truck driver, lives with his family in Tucson, Arizona. He is employed by a trucking firm that has its terminal in
Phoenix, Arizona. At the end of his long runs, Jared returns to his home terminal in Phoenix and spends one night there before
returning home. Phoenix is considered his tax home. He cannot deduct any expenses he has for meals and lodging in Phoenix
or the cost of traveling from Phoenix to Tucson.

Chloe lives with her family in Pittsburgh, Pennsylvania, where she works 12 weeks a year. The rest of the year she
works for the same employer in Baltimore, Maryland. In Baltimore, she eats in restaurants and sleeps in a rooming house. Her
salary is the same whether she is in Pittsburgh or Baltimore. Because she spends most of her working time and earns most of
her salary in Baltimore, that city is her tax home. She cannot deduct any expenses she has for meals and lodging there.
However, when she returns to work in Pittsburgh, she is away from her tax home even though she stays at her family's home.
Chloe can deduct the cost of her round trip between Baltimore and Pittsburgh and her part of her family's living expenses for
meals and lodging while she is living and working in Pittsburgh.
Temporary Travel
To have qualified job-related travel expenses, you can either be temporarily away from home or on a temporary assignment.
You are considered to be temporarily away from home if your duties require you to be away from the general area of your tax
home substantially longer than an ordinary day's work and you need to sleep or rest to meet the demands of your work while
away from home. Review the following examples of whether job-related travel expenses can be deducted for temporary travel:

Bob is a railroad conductor. He leaves his home terminal on a regularly scheduled round-trip run between two cities and
returns home 16 hours later. During the run, Bob has six hours off at his turnaround point where he eats two meals and rents a
hotel room to get necessary sleep before starting the return trip. Bob is considered to be away from home. He can deduct his
expenses.

Jared is a truck driver. He leaves his terminal and returns to it later the same day. He gets an hour off at his turnaround
point to eat. Because Jared is not off to get necessary sleep and the brief time off is not an adequate rest period, he is not
traveling away from his tax home. He cannot deduct his expenses.
You will generally be considered on a temporary assignment if you realistically expect it to last (and it does last) for one year or
less. Note: If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the
one-year rule. For example, Carlos is a construction worker who lives and regularly works in Los Angeles, California. He is a
member of a trade union in Los Angeles that helps him get work in the Los Angeles area. Because of a shortage of work, he
took a job on a construction project in Fresno, California. His job was scheduled to end in a certain number of months but
actually lasted 10 months. There are three possible scenarios:

Carlos realistically expected the job in Fresno to last eight months. The job actually lasted less than one year. The job is
temporary and his tax home is still in Los Angeles. He can deduct his expenses.

Carlos realistically expected the work in Fresno to last 18 months but the job actually was completed in 10 months.
Fresno became his tax home because his job in Fresno was considered indefinite (even though it actually lasted less than one
year, he realistically expected the work to last longer than one year). Carlos cannot deduct any travel expenses he had in
Fresno.

Carlos realistically expected the work in Fresno to last nine months. After eight months, he was asked to remain for
seven more months (for a total actual stay of 15 months). Due to changed circumstances occurring after eight months, it was no
longer realistic for Carlos to expect that the job in Fresno would last for one year or less. Carlos can deduct his travel expenses
only for the first eight months. He cannot deduct any travel expenses he had after that time because Fresno became his tax
home when the job became indefinite.
Please remember that your Jackson Hewitt tax preparer is ready to help answer any questions you may have regarding jobrelated travel expenses. You should bring documentation of all of your job-related travel expenses to your interview with your
Jackson Hewitt tax preparer.
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